Australia’s massive oil and gas decommissioning liability is the focus of government and industry as safety and environmental risks – as well as future economic opportunities – become increasingly prevalent.
The federal government is developing a roadmap to establish an Australian offshore decommissioning industry, having released an issues paper in September which sets out a pathway for governments, industry, the local workforce and community to build capability in decommissioning oil and gas infrastructure.
Minister for Resources Madeleine King also outlined the potential for immense economic opportunities and the creation of well-paid jobs in regional communities.
To help inform the roadmap, the government called for industry and public feedback on barriers and opportunities for decommissioning in a number of areas, including infrastructure and adjacent industries, the workforce, First Nations engagement, waste management and recycling, and regulatory frameworks.
Alex Hillman, Lead Analyst at the Australasian Centre for Corporate Responsibility, said the public consultation on strengthening regulations was long overdue.
He said: “The Australian offshore oil and gas decommissioning liability has been estimated at $60 billion to 2050, with a significant portion of work due to occur within this decade.
“[This] is likely an underestimate, because the true state and cost for many aging offshore oil and gas facilities is uncertain; existing public datasets are limited and company disclosure is generally minimal.
“Internationally, remediation costs have exceeded provisions, by an average of 76 per cent.
“Yet companies who could have foreseen these risks have not sufficiently disclosed their preparation plans or financial liabilities, leaving investors in the dark about these substantial costs.”
Hillman added that NOPSEMA expected the decommissioning to be complex, expensive, span many years and introduce many new and significant safety, environmental and well integrity risks.
Improperly abandoned wells can pose risks to the environment and the health of neighbouring communities by contaminating groundwater and releasing toxic air pollutants such as naturally occurring radioactive materials, metals, and other volatile organic compounds such as benzene.
Without adequate plugging, oil and gas wells can also contribute to climate change, emitting large volumes of natural gas, including methane, a potent greenhouse gas.
The Maritime Union of Australia (MUA) recently urged the federal government for a major shakeup of government policy and regulation around the dismantling, processing, recycling, and disposal of offshore oil and gas infrastructure.
In a paper released October, the MUA along with Macquarie University’s Centre for Energy and Natural Resources Innovation and Transformation identified gaps in the existing legal framework and also provided high-level recommendations for the development of effective government policy.
Prepared by Professor Tina Soliman-Hunter, the report demonstrated that Australia’s policy and regulatory framework did not represent best practice and reform was required.
Referring to more regulated decommissioning industries such as in Norway or the United Kingdom, Professor Soliman-Hunter said there were no such requirements in Australia due to policy decisions made in the 1990s – and continuing today – that prioritise attracting international investment over government intervention in recovery.
She added: “Furthermore, there is no legal capacity in the offshore petroleum legal framework for consideration of the legitimate reuse or repurposing of offshore installations and infrastructure (OI&I).
“Many of Australia’s OI&I are at or beyond retirement age, particularly those in Bass Strait, necessitating immediate decommissioning and dismantling, processing, recycling and disposal (DPRD); others are approaching retirement age and will require immediate decommissioning and DPRD.”
The Centre of Decommissioning Australia (CODA) has estimated about 5.7 million tonnes of decommissioning material needs to be removed from offshore oil and gas facilities and projects, which is the equivalent of 110 Sydney Harbour Bridges.
Most of the material (89 per cent) is offshore Western Australia, while the remainder is offshore Victoria, and about 60 per cent of the material is steel, most of which will be able to be recycled.
A further 25 per cent of the material is concrete, as part of offshore structures or pipeline coating, and about 67 per cent of all material is related to pipelines (trunklines and infield).
Removal of pipeline-related material will depend on the requirements of NOPSEMA.
The full removal of all equipment installed just offshore will cost US$40.5 billion, according to CODA, with a rapidly increasing workload between 2020 and 2030.
When considering Australia’s total on- and offshore decommissioning liability, CODA has estimated about 51 per cent will occur in the next 10 years, with a further 23 per cent of liability forecast between 2031-2040.
Research conducted by CSIRO’s Gas Industry Social and Environmental Research Alliance (GISERA) has investigated various aspects of onshore decommissioning, such as developing effective long-term management and monitoring options, and materials and techniques for improving structural integrity.
Overall, GISERA’s work showed that the best outcomes for decommissioned wells occurred when planning for decommissioning was part of up-front design and ongoing operations.
A monitoring investigation of onshore wells in the Northern Territory by GISERA concluded that long term integrity risks to decommissioned wells could be foreseen and managed during their operational lives.
Importantly, GISERA explained monitoring post decommissioning was valuable in providing assurance that the wells were not causing a significant environmental impact.